Tuesday, May 19, 2015

Not By A Long Shot; Look At These EURs In The Bakken -- No, The Bakken, Eagle Ford Are Not Past Their Prime -- Not By A Long Shot -- May 19, 2015

Bakken production will keep growing, albeit at a slower pace, and the Eagle Ford still has running room within high-return portions of the play, according to a recent analysis by Wood Mackenzie.

The Bakken and Eagle Ford together produce just over 2.5 million barrels per day of oil, or nearly two-thirds of U.S. tight oil production.

Higher oil prices in the 2013-2014 time frame spurred operators to drill not only in the core of the Williston Basin, but in the fringe and speculative areas. This included areas along the Montana-North Dakota border, the northern most part of the play near the Canadian border, and the southern portion of the Williston Basin.

Operators have responded to the decline in global oil prices from over $100/bbl last year to around $60/bbl today by reducing rig counts and retrenching drilling activity to the core Bakken area.

In the early third quarter of 2014, the rig count in the Bakken was 185 to 190 rigs. Today, 86 rigs are operating in the Bakken. The rig count is down across U.S. Lower 48 plays, including the Bakken play. Early in last year’s third quarter, between 185 and 190 rigs were operating in the Bakken. As of May 15, that number had declined to 84.

However, the decline in drilling rig counts has not occurred evenly across the Bakken. In Divide County on the northern fringe of the Bakken – where the Bakken is thinner and pressure isn’t there versus deeper parts of the play – the rig count is down about 70 percent due to the play’s more challenging economics. But in McKenzie County in the play’s core – home to the more prospective subsplays, the West Nesson and the Nesson Anticline – the rig count has not dropped off as significantly as other areas.

The biggest Bakken wells in terms of production lie in the eastern fringe of the Bakken in the Parshall-Sanish, Fort Berthold and Nesson Anticline subplays.

Wood Mackenzie anticipates that estimated ultimate recovery (EUR) for these wells this year and in early 2016 will likely outperform EUR estimates due to the retrenchment to the core and operators attacking their best rocks first.

More:

An example of this shift is Continental Resources. Last year, the company said it would drill an average well in the Bakken of 600,000 barrels of oil equivalent. Due to low oil prices, Continental recently said that it would only drill 800,000 barrel wells or greater.

Despite calls that Bakken production will roll over, Wood Mackenzie believes that the Bakken will see a modest increase in production this year. In 2014, the play produced 1.1 million barrels per day of oil.

Wood Mackenzie now estimates the Bakken will produce just over 1.2 million bpd in 2015, a change from initial estimate made early last year.

Wood Mackenzie anticipates that EURs in 2015 and the first half of 2016 will likely outperform the EUR base case by 20 percent because of companies’ highgrading their activity.

Wood Mackenzie expects to see the biggest future production gains in the West Nesson subplay. By 2020, Wood Mackenzie anticipates the West Nesson subplay will be “head and shoulders” against other subplays in the Bakken. While other subplays like the Parshall-Sanish are dominated by a few players, West Nesson is unique in that 12 to 13 good-size operators are drilling fantastic wells there, which will lead development over the next five years.

Much, much more at the link.

Looks like I'll be blogging about the Bakken for a few more years. Big smile.

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A Note to the Granddaughters

To the granddaughters: thank you for another awesome evening of grilling. Our plan is to have a special evening of grilling every Tuesday. Tonight's steak and chicken was perfect. All the sides to accompany the Omaha Steaks and the Minyard chicken breasts were perfect. The ten-month-old was in charge of holding the meat thermometer when the thermometer was not being used. She performed her task quite well.